Ineos bids to become UK leader in shale 'fracking' with £640m investment plan

The Luxembourg-based group, which owns the Grangemouth refinery, said it will become the 'biggest player in the UK Shale gas industry' if it wins all of the shale gas licences it has applied for, most of which are in Scotland and the North East of England

Grangemouth refinery owner Ineos has announced plans to invest $1 billion (£640 million) in controversial shale gas exploration and appraisal across the UK.

The Luxembourg-based group, which has recently acquired stakes in two license areas in Central Scotland covering 729 sq. km, said it will be “the biggest player in the UK Shale gas industry” if it wins all of the shale gas licences it has applied for from the Department of Energy & Climate Change (DECC).

Ineos said the “vast majority” of the licence bids it has made are “in Scotland and the North of England, where the local populations have either a mining or an industrial heritage”.

Gary Haywood, chief executive of INEOS Upstream, said: “Whilst the awarding of the licences is a matter for DECC, we believe our knowledge and experience in running complex petrochemical facilities, coupled with the world class sub surface expertise we have recently added to our team, means that INEOS will be seen as a very safe pair of hands.”

Ineos said the planned investment into UK onshore shale gas appraisal and exploration would be followed up with “substantial further investment” if the company moves into development and production.

Ineos chairman Jim Ratcliffe said: “I want Ineos to be the biggest player in the UK Shale gas industry.

“I believe Shale gas could revolutionise UK manufacturing and I know Ineos has the resources to make it happen, the skills to extract the gas safely and the vision to realise that everyone must share in the rewards.”

Last year Ineos had threatened to close the Grangemouth refinery unless staff accepted new pay and pension terms and the UK and Scottish government's provided financial support to its long-term survival plan for Grangemouth.

Central to the survival plan were government-backed loan guarantees Ineos needed to build what will be the largest ethane gas storage and processing facility in Europe at the Grangemouth site, which Ineos said would allow it to import cheaper shale gas from the US.

In July, the UK government provided Ineos with a £230 million loan guarantee to fund construction of the ethane storage tank, with Ineos reported to have also invested £300 million as part of its Grangemouth survival plan agreement.

Then in August, Ineos announced it was moving into UK shale gas exploration after agreeing a deal for a 51 per cent stake in a 400 sq km exploration licence area in Central Scotland, which includes the Grangemouth site and surrounding area.

In September, Ineos announced it would give six per cent of shale gas revenues to local communities in a bid to win support for its plans to drill in Central Scotland – a proposal reiterated by the group in today's announcement.

Ineos chairman Jim Ratcliffe had described the revenue share offer as a “game changer” to the UK shale gas sector.

Ineos followed up in October with an acquisition of a majority stake in a neighbouring 329 km sq shale gas exploration area in Central Scotland.

The UK Government is widely supportive of shale gas extraction, with Prime Minister David Cameron stating in January 2014 Britain is “going all out for shale” in the belief the UK's energy markets could be transformed on a par seen in the US.

Mr Cameron announced in January plans allow English councils to keep 100 per cent of business rates raised from fracking sites in a bid to speed up local planning.

The Chancellor George Osborne has also spoken of the “huge potential” fracking presents, though academic researchers accuse the government of having “over-hyped” the potential impact.

Research published by the UK Energy Research Centre (UKERC) based at Imperial College suggests shale gas extraction in the UK is unlikely to have the impact seen in the US and described claims fracking could return the UK to energy self-sufficiency as “far-fetched”.

In September the UK Government announced plans to allow fracking companies to drill under people's land without their agreement despite a 99 per cent rejection rate from the 40,647 respondents to the consultation.

The coalition government argues the current laws allowing landowners to block development of fracking under their property would lead to delays and higher costs for operators.

The Department of Energy and Climate Change said: “New laws will now be passed giving automatic access for gas and oil development below 300m and a notification and compensation scheme will be run by the industry on a voluntary basis.

“It is essential that we make the most of home-sourced energy and start exploring the natural energy supplies beneath our feet.

A number of environmental and community groups in Scotland have demanded a moratorium on fracking activity in Scotland.

Richard Dixon, director of Friends of the Earth Scotland, said the Scottish Government's tougher stance on planning and commitment to renewable energy make Scotland “the last place any company should apply to frack”.

Ineos Group Holdings SA recently reported in a second quarter trading update in July its unaudited net debt position was euro 6.2 billion (£4.96 billion) and cash balances at the end of the quarter - to June 30 - were euro 1,087 million (£869 million) and availability under undrawn working capital facilities was euro 271 million (£216.6 million).